1) What is my center worth?
Appraisers have all types of methods for determining the value of your center: Sales Approach, IRR, Income Approach, Replacement Cost Approach etc. The truth is, your center is worth what someone is willing to pay for it. And that opens up a second question: How do I know what someone is willing to pay for my center? Ambulatory Alliances recommends a two stage offer solicitation process. We will proactively market your center to multiple buyers and multiple buyer types, then leverage competitive bids. This process helps answer the second question of what buyers will be willing to pay for your center.
2) What are the different types of potential buyers for my center?
There are many different types of buyers for your center. Some potential buyers are tunnel buyers, roll-up buyers, health systems, private equality groups, competitors etc.
The key to getting the best possible price for your center is to determine who among the different types of buyers is a strategic buyer, since they are typically the buyers that are willing to pay the most for centers. The strategic buyer is one that sees your center as valuable to their strategic business interest and therefore is occasionally willing to pay more for your center than what others are willing to pay. Sometimes that amount is greater than an appraised value. For a buyer such as this, acquisition of your center is determined to be paramount to their strategic plan, and that single acquisition can pave the way for quicker and increased long term revenue than they believe they could have obtain though other means.
3) Will I always know who the strategic buyers are for my center?
There will be organizations that contact you directly to gauge your interest in selling your center. They could utilize any form of negotiation tactics to leverage the best price for THEM. They may even state that your center is of strategic interest to them and that their offer is based off of their strategic needs. While this could be true, the only way you can be confident that you are getting the best offers is to create competition for your center.
4) I had a major company contact me about purchasing my center and they wanted me to sign a “no shop agreement.” Why do they want me to agree to not negotiate with other potential buyers?
This organization wants to limit your options and remove your greatest leverage tool—competition. They understand that increased demand for any product (your center) will increase the price and decrease their profits. They will even tell you that they will not participate if there is competition for your center. I would ask them why they are calling you if that is indeed the case.
5) Why would I sell now when I am so profitable and growing rapidly?
When a company is at about 70% capacity, profitable and growing, it is the perfect time to sell. The highest premiums are obtained when you are still on an upward track, rather than at your peak or declining. It is also worth considering selling a portion of your center (recapitalizing) when the value is high, and sell the remainder when the center peaks. This can diversify your risk and take care of you and your family for the future.
6) What steps can I take now to prepare my center for a smooth liquidity event?
It is important to perform a financial audit, invest in infrastructure and appropriate management, and focus on the core strengths of your service offering. Moves that offer little strategic value other than adding to the bottom line—such as adding business lines that are not complementary to core offerings—will likely only make your company less attractive to potential buyers.
7) What are the benefits of working with an investment bank?
Sellers work with investment banks for a variety of reasons, and benefit from the relationship in a variety of ways. Because emotion can sometimes hinder these transactions, maintaining a competitive and businesslike environment is one of the most important ways an Investment Banker can influence the process. Ambulatory Alliances works diligently to remove distractions and allows you to keep your focus on running your business. Likewise, utilizing Ambulatory Alliances' two-stage offer solicitation process and vast network of developed relationships saves you time while giving you access to a larger targeted pool of qualified potential buyers than you might have on your own. Buyers are also more likely to take you seriously when you show the commitment to partnering with a firm with an in-depth understanding of the healthcare industry.
8) I am interested in raising capital to help grow my business. What are some of the options that I have?
Ambulatory Alliances offers assistance with finding a variety of capital options, including minority/ majority recapitalization with a private equity firm, and raising debt capital or equity financing.
9) I am concerned that my customers, employees, and competitors will find out that I want to sell my company. How is this managed during a transaction process?
Confidentiality is a top priority, and we have a thorough approach to ensuring it, beginning with non-disclosure agreements, which are signed by everyone involved from Ambulatory Alliances, as well as any outside party involved in the process. We also work with you to create a limited, strategically targeted buyer pool. Further, we keep a proprietary data room and encourage use of the phone and internet during as much of the process as possible which allows you to protect your confidentiality.
10) How do I sell my business without anyone finding out?
The first contact Ambulatory Alliances makes with the potential market of buyers for your business is via a blind (anonymous) one or two page profile in which your location and company are described in general terms. Additionally, key financials and a description of your products and services, along with a short list of salient growth opportunities are included in the profile, but your company is not identified in the initial document. The next piece of information a prospective buyer receives is delivered only after he signs a binding confidentiality agreement. At that point, the buyer receives the detailed Confidential Descriptive Memorandum.
11) Do buyers buy private companies based on EBITDA, PE or Price vs. Book Value?
Generally, buyers determine a company's prospects on the basis of recent results, growth opportunities, and overall company quality, as well as on a multiple of EBITDA common for that industry at the time of sale. PE is not a relevant metric for valuing private companies, and book value is not an accurate reflection of the worth of a business in the marketplace.